D4 Published development or research report or study
Prefilled Income Tax Returns and Tax Compliance: Evidence from a Natural Experiment
Authors: Kotakorpi Kaisa, Laamanen Jani-Petri
Publisher: Tampereen yliopisto
Publishing place: Tampere
Publication year: 2016
Series title: Tampere Economics Working Papers
Number in series: 104
ISBN: 978-952-03-0150-7
ISSN: 1458-1191
Web address : http://urn.fi/URN:ISBN:978-952-03-0150-7
Abstract
Despite the adoption of prefilled tax forms in many countries, little is known about their effects on taxpayers’ reporting behaviour. We estimate the effect of the income tax filing system on taxpayers’ reporting behaviour, utilising data from a Finnish policy experiment. We find that receiving a (partially) prefilled income tax return lead to a significant reduction in non-prefilled deductions and self-reported income, and an increase in deductions that were prefilled in the new system. However, we do not find effects on individuals’ total taxable income or taxes paid. We discuss complexity and compliance costs, salience effects, and changes in the opportunities for tax evasion as possible explanations for our findings.
Despite the adoption of prefilled tax forms in many countries, little is known about their effects on taxpayers’ reporting behaviour. We estimate the effect of the income tax filing system on taxpayers’ reporting behaviour, utilising data from a Finnish policy experiment. We find that receiving a (partially) prefilled income tax return lead to a significant reduction in non-prefilled deductions and self-reported income, and an increase in deductions that were prefilled in the new system. However, we do not find effects on individuals’ total taxable income or taxes paid. We discuss complexity and compliance costs, salience effects, and changes in the opportunities for tax evasion as possible explanations for our findings.
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